FRENCH PHARMA SUBSIDIARY COMPANY TO PAY $32 MILLION TO RESOLVE CHARGES OF VIOLATING FDCA

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, September 3, 2015

Genzyme Corporation to Pay $32.5 Million to Resolve Criminal Liability Relating to Seprafilm

Sanofi Subsidiary Admits Unlawful Conduct and Agrees to Enhance its Compliance Program

Genzyme Corporation, a wholly-owned biotechnology subsidiary of French pharmaceutical company Sanofi, agreed today to resolve criminal charges that it violated the federal Food, Drug and Cosmetic Act (FDCA) with regard to the unlawful distribution of Seprafilm, a surgical device it markets and promotes, the Justice Department announced.

As part of the agreed resolution, the department filed a two-count criminal information in the U.S. District Court for the Middle District of Florida charging that between 2005 and 2010, Genzyme caused a medical device to become adulterated and misbranded while being held for sale.  The conduct occurred prior to Sanofi’s acquisition of Genzyme, based in Cambridge, Massachusetts, in 2011.  To resolve these charges, Genzyme agreed to enter into a deferred prosecution agreement with the government for a term of at least two years.  As part of the agreement, Genzyme agreed to admit to and accept responsibility for the facts underlying the charges and pay a monetary penalty of $32,587,439.  It further agreed to undertake several groundbreaking measures to enhance its internal compliance program.  The agreement also acknowledges the significant level of cooperation Genzyme provided to the government during its investigation as well as the company’s independent remediation efforts.

Along with the information, the government also filed a consent motion with the court, requesting that its case against Genzyme be stayed during the term of the agreement.  If Genzyme fulfills its obligations under the agreement, the government will dismiss the charges it filed today at the end of the agreement’s term.

Today’s agreement is in addition to a separate $22.28 million civil agreement the government reached with Genzyme in December 2013 to resolve allegations under the False Claims Act related to Seprafilm.  After today’s agreement, Genzyme will have paid almost $55 million to resolve government allegations regarding Seprafilm.  If Genzyme fulfills its obligations under the agreement, the government will dismiss the charges it filed today at the end of the agreement’s term.

“Today’s action demonstrates that the Department of Justice will evaluate the facts of each case and choose the most appropriate tool of the several available to it to best address criminal misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of  the Justice Department’s Civil Division.  “The deferred prosecution agreement with Genzyme is yet another example of the department’s continuing efforts to ensure that pharmaceutical and medical device manufacturers adhere to laws and regulations that have been put in place to protect the health and safety of the American public.”

According to the papers filed in the district court today, Seprafilm is a clear piece of film that can be applied to internal tissues during pelvic and abdominal surgeries to reduce the formation of adhesions—bands of scar tissue that can form between traumatized tissues and organs after surgery, causing them to stick together.  Seprafilm was approved by the U.S. Food and Drug Administration (FDA) for use in patients undergoing open abdominal or pelvic laparotomy, which is a traditional surgical technique that utilizes a relatively large incision to permit the surgeon to open and view the patient’s abdominopelvic contents.  Over time, laparotomy became a less common surgical technique in favor of laparoscopic surgery, which is perceived to have several advantages for the patient.

To respond to the diminishing number of laparotomies performed, some Genzyme sales representatives taught surgeons and other medical staff how to mix the Seprafilm sheets into a liquid “slurry” that could be squirted through the narrow tubes used during laparoscopic surgery, even though Seprafilm was never indicated or FDA-approved for use in laparoscopic procedures.  Genzyme sales representatives’ participation in the preparation of slurry in the operating room caused Seprafilm to become adulterated, according to the criminal charges.

During the course of the government’s investigation regarding Seprafilm slurry, Genzyme voluntarily disclosed to the government that it had distributed promotional material for Seprafilm that implied that Seprafilm had been proven safe and effective for use in gynecologic cancer surgeries, even though Seprafilm’s FDA-approved label cautioned that the device had not been clinically evaluated in the presence of malignancies.  Genzyme based its claim on a study that involved only fourteen patients, which was far too few to support such an assertion.  A separate count in the government’s information charges that Genzyme’s use of this misleading promotional material caused Seprafilm to become misbranded while held for sale.

“Patients rely heavily on the integrity and efficacy of claims made by manufacturers of medical products,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “When manufacturers make misleading statements about using their products in ways that have not been approved by the FDA, patient care, confidence, and safety are put at risk.”

The case has been handled by Trial Attorney Ross S. Goldstein of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Simon Gaugush, Chief of the General Crimes Section at the U.S. Attorney’s Office of the Middle District of Florida, with support from FDA’s Office of Criminal Investigations and Office of Chief Counsel.

OWNER, MANAGERS AMBULANCE COMPANY CONVICTED FOR ROLES IN MEDICARE FRAUD SCHEME

 FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, August 19, 2015

Ambulance Company Owner, Operator and Managers Found Guilty in Medicare Fraud Conspiracy

A federal jury in Los Angeles late yesterday convicted the former owner, operator and managers of a Southern California ambulance company of health care fraud charges in connection with a Medicare fraud scheme of at least $2.4 million.  

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Acting Special Agent in Charge Steve Ryan of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) Los Angeles Region and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division made the announcement.

Yaroslav Proshak, aka Steven Proshak, 47, of Valley Village, California; Emilia Zverev, 58, of Van Nuys, California; and Sharetta Michelle Wallace, 37, of Inglewood, California, each were convicted of one count of conspiracy to commit health care fraud and five counts of health care fraud following a two-week trial.  Proshak’s sentencing is scheduled for Nov. 24, 2015, and Zverev’s and Wallace’s sentencing is scheduled for Nov. 30, 2015, all before U.S. District Judge S. James Otero of the Central District of California, who presided over the trial.

Proshak owned and operated ProMed Medical Transportation, an ambulance transportation company in the greater Los Angeles area that provided non-emergency ambulance transportation services to Medicare beneficiaries, many of whom were dialysis patients.  Zverev was the billing manager, and Wallace supervised ProMed’s emergency medical technicians (EMTs).

The evidence at trial demonstrated that, between May 2008, and October 2010, the defendants conspired to bill Medicare for ambulance transportation services for individuals whom the defendants knew did not need such services.  In addition, the evidence showed that the defendants instructed EMTs who worked at ProMed to conceal the true medical conditions of patients they were transporting by altering requisite paperwork and creating fraudulent documents to justify the transportation services.

According to evidence admitted at trial, during the course of the conspiracy, ProMed submitted at least $2.4 million in false and fraudulent claims to Medicare for medically unnecessary transportation services.  Medicare paid at least $1.2 million of those claims.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.  The case was investigated by the FBI and HHS-OIG.  The case was prosecuted by Trial Attorneys Blanca Quintero, Fred Medick and Ritesh Srivastava of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 2,300 defendants who have collectively billed the Medicare program for more than $7 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Labor Department News Releases Update

Labor Department News Releases Update

Recall - Stuffed Chicken/Possible Salmonella Enteritidis Contamination

Recall - Stuffed Chicken/Possible Salmonella Enteritidis Contamination

FTC SAYS SUPPLEMENT MARKETERS TO PAY $1.4 MILLION IN SETTLEMENT OF ALLEGED DECEPTIVE ADVERTISING CASE

FROM:  U.S. FEDERAL TRADE COMMISSION 

Supplement Marketers Will Relinquish $1.4 Million to Settle FTC Deceptive Advertising Charges

Ads Claimed Procera AVH Would Restore 10 to 15 Years of Memory Loss

The marketers of a dietary supplement called Procera AVH will relinquish $1.4 million under settlements resolving Federal Trade Commission charges that they deceived consumers with claims that the supplement was clinically proven to significantly improve memory, mood, and other cognitive functions.

Under the terms of the settlements, the defendants will pay $1 million to the FTC, and another $400,000 to satisfy a judgment in a case brought by local California law enforcement officials. They also will be barred from making similar deceptive claims in the future and from misrepresenting the existence, results, or conclusions of any scientific study.

“The defendants in this case couldn’t back up their claims that Procera AVH would reverse age-related mental decline and memory loss," said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Be skeptical of ads promising quick and easy cures.”

According to the FTC’s complaint, the defendants marketed and sold Procera AVH as a “solution” to memory loss and cognitive decline, including as associated with aging. The defendants advertised the product using infomercials, direct mail flyers, newspapers, and the Internet.

In one newspaper ad for the product the headline stated: “Memory Pill Helps the Brain Like Prescription Glasses Help the Eyes … Remarkable changes observed, helps users match the memory power of others 15 years younger in as little as 30 days!”

The cover of a multi-page direct mail ad was called a “Special Edition” of the “Physician’s Mind and Memory Alert.” Inside the text stated: “The thought of being a prisoner in one’s own home, or being unable to recall who you are, where you live, or to whom you are related is sending forgetful baby boomers and retirees scrambling for a solution.” The ad then promoted Procera AVH as “the memory pill preferred by many doctors.”    

Procera AVH typically cost $79 per bottle, or $119 for three bottles for consumers who signed up for the continuity purchase plan and agreed to get automatic refills.

The complaint names KeyView Labs LLC, Brain Research Labs, LLC, George Reynolds (a/k/a Josh Reynolds), John Arnold, and three related companies.

The Commission’s complaint alleges that efficacy claims for Procera AVH were false, misleading, or unsubstantiated and that the defendants falsely claimed that a scientific study proved the products efficacy. The complaint also charges Reynolds, the founder and chief science officer of Brain Research Labs, with making deceptive expert endorsements for Procera AVH.

The two proposed settlement orders against the defendants impose a $61 million judgment against KeyView and a $91 million judgment against the remaining defendants.

The judgments direct the defendants to pay $1 million to the FTC, and an additional $400,000 to satisfy a judgment obtained by local law enforcement in Santa Cruz, California against Brain Research Labs and Reynolds. If the $400,000 is not paid to satisfy the Santa Cruz judgment, it is immediately due to the Commission. Once the $1.4 million is paid, the judgments will be suspended.

The Commission votes approving the complaint and two proposed stipulated final orders were each 5-0. The orders are subject to court approval. The FTC filed the complaint and proposed orders in the U.S. District Court for the Central District of California.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Council’s goal of increasing the number of Americans who are healthy at every stage of life. These cases are part of the FTC’s ongoing effects to protect consumers from misleading advertising.

ASTRAZENECA AND CEPHALON TO PAY MILLIONS FOR ALLEGED UNDERPAYMENT OF REBATES OWED MEDICAID DRUG REBATE PROGRAM

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, July 6, 2015

AstraZeneca and Cephalon to Pay $46.5 Million and $7.5 Million, Respectively, for Allegedly Underpaying Rebates Owed Under Medicaid Drug Rebate Program

AstraZeneca LP has agreed to pay the United States and participating states a total of $46.5 million, plus interest, to resolve allegations that it knowingly underpaid rebates owed under the Medicaid Drug Rebate Program, the Justice Department announced today.  Of that amount, AstraZeneca will pay roughly $26.7 million, plus interest, to the United States, and the remainder to states participating in the settlement.

In a separate settlement arising out of the same case, Cephalon Inc. has agreed to pay the United States and participating states a total of $7.5 million, plus interest, to resolve similar allegations.  Of that amount, Cephalon will pay roughly $4.3 million, plus interest, to the United States, and the remainder to states participating in the settlement.

“The Medicaid Drug Rebate Program relies on drug manufacturers reporting accurate pricing information used in the rebate calculations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division.  “These settlements demonstrate the Department of Justice’s commitment to ensuring that state Medicaid programs receive the full amount of rebates from manufacturers that Congress intended.”

“We will continue to police the pharmaceutical industry when the Medicaid program overpays for drugs,” said First Assistant U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania.  “As these settlements demonstrate, it is critical for pharmaceutical manufacturers to comply with requirements of programs such as the Medicaid Drug Rebate Program to ensure that the government and the taxpayers are treated fairly in the reimbursement process.”

Pursuant to the Medicaid Drug Rebate Program, drug manufacturers are required to pay quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the manufacturers’ drugs.  The quarterly rebates are based, in part, on the Average Manufacturer Prices (AMPs) that the manufacturers report to the government for each of their covered drugs.  Generally, the higher the reported AMP for a drug, the greater the rebate the manufacturer pays to state Medicaid programs for the drug.  These settlements resolve allegations that AstraZeneca and Cephalon underreported AMPs for a number of their drugs by improperly reducing the reported AMPs for service fees they paid to wholesalers.  As a result, the government contends that AstraZeneca and Cephalon underpaid quarterly rebates owed to the states and caused the United States to be overcharged for its payments to the states for the Medicaid program.

The two settlements partially resolve a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The amounts to be received by the whistleblower in this suit, Ronald J. Streck, a pharmacist, have not yet been determined.

These settlements illustrate the government’s emphasis on combating health care fraud and mark another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $24.8 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlements with AstraZeneca LP and Cephalon Inc. were the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Pennsylvania and the Department of Health and Human Services-Office of Inspector General.

FTC SETTLES WITH APP DEVELOPER ACCUSED OF HIJACKING PHONES TO MINE CRYPTOCURRENCY

FROM:  U.S. FEDERAL TRADE COMMISSION  

App Developer Settles FTC and New Jersey Charges It Hijacked Consumers’ Phones to Mine Cryptocurrency

Defendants’ App Installed Malware that Left Phones With Drained Batteries, Depleted Data Plans

A smartphone app developer has agreed to settle charges by the Federal Trade Commission and the New Jersey Attorney General that it lured consumers into downloading its “rewards” app, saying it would be free of malware, when the app’s main purpose was actually to load the consumers’ mobile phones with malicious software to mine virtual currencies for the developer.

The Ohio-based defendants behind the app, called “Prized,” agreed to a settlement that will permanently ban them from creating and distributing malicious software.

“Hijacking consumers’ mobile devices with malware to mine virtual currency isn’t just deplorable; it’s also illegal,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These scammers are now prohibited from trying such a scheme again.”

The defendants, Equiliv Investments and Ryan Ramminger, began marketing the Prized app around February 2014, making it available in the Google Play Store, Amazon App Store and others. Thousands of consumers downloaded the app believing they could earn points for playing games or downloading affiliated apps and then spend those points on rewards such as clothes, gift cards and other items. Consumers were promised that the downloaded app would be free from malicious software – malware – or viruses, according to the complaint.

What consumers got instead, according to the complaint, was an app that contained malware that took control of the device’s computing resources to “mine” for virtual currencies like DogeCoin, LiteCoin and QuarkCoin.

Virtual currencies are created by solving complex mathematical equations, and the complaint alleges that the app attempted to harness the power of many users’ devices to solve the equations more quickly, thus generating virtual currency for the defendants. The use of that power caused the device’s battery to drain faster and recharge more slowly, and to burn through consumers’ monthly data plans.

“Consumers downloaded this app thinking that at the very worst it would not be as useful or entertaining as advertised,” said Acting New Jersey Attorney General John J. Hoffman. “Instead, the app allegedly turned out to be a Trojan horse for intrusive, invasive malware that was potentially damaging to expensive smartphones and other mobile devices.”      

The complaint in the case alleges that the defendants violated both the FTC Act and the New Jersey Consumer Fraud Act. In addition to the ban on creating and distributing malicious software, the court order also requires the defendants to destroy all information about consumers that they collected through the marketing and distribution of the app.

The settlement also includes a $50,000 monetary judgment against the defendants payable to the state of New Jersey, of which $44,800 is suspended upon payment of $5,200 and compliance with the injunctive provisions of the stipulated order.

This case is part of the FTC’s ongoing work to protect consumers taking advantage of new and emerging financial technology, also known as FinTech. As technological advances expand the ways consumers can store, share, and spend money, the FTC is working to keep consumers protected while encouraging innovation for consumers’ benefit.

The Commission vote authorizing the staff to file the complaint and approving the proposed stipulated court order was 5-0. The FTC and state of New Jersey filed the complaint and order in the U.S. District Court for the District of New Jersey.